VAT Registration in India

Value Added Tax or VAT is a mandatory requirement for all kinds of business. Proprietorships, partnerships, private limited companies, manufacturing firms and even traders of any kind of products need VAT registration. VAT is similar to Central Service Tax (CST) and Taxpayer Identification Number (TIN). They use the same 11 digit number.

What is VAT?
VAT is an indirect tax levied on goods and services when they are sold to the ultimate customer. VAT is paid by the producers to the government. The producers then collect the tax amount from the consumer, by adding it to the price.
A registered business may also apply for the Input Tax Credit (ITC) and apply it on future sales. This will relieve the company of paying VAT themselves. With ITC registration, the VAT amount is added to the retail invoice and the customer makes the payment.

When is VAT Registration Compulsory?
Businesses with an annual turnover of more than Rs.5 lakhs (in some states it is Rs.10 lakhs), must acquire a registered VAT id. The VAT rates vary from state to state, business categories and the type of goods delivered. The amount of VAT charged is controlled by the state governments. This is why it varies from place to place.
The tax is based on value addition to manufactured goods. VAT id owners having an annual turnover of Rs. 50 lakhs are entitle to the Composition Scheme. Under this scheme the business must pay only a small percentage of tax on its gross turnover. However, it requires the said business to compromise its ITC agreement and forgo its benefit.

Acquiring a VAT id
To obtain a VAT id you need to go through the process of VAT id registration. The procedure involves 6 basic steps.

Step – 1 Locate Central Tax Office
Identify the Central Tax Office within the city your business is based. The tax office should house the VAT registration department as well.

Step – 2 Obtain Registration Form
Request for a VAT id registration form from the VAT office.

Step – 3 Attach Valid Documents
Fill out the application form with the correct details and attach the following documents to it:
– Central Sales Tax registration certificate (Form A)
– Professional Tax registration certificate
– Proof of address and ID of the proprietor, partner or director
– Four passport size photographs of the proprietor, partner or director
– Bank account number and PAN card number of the proprietor, partner or director
– Documents stating the details of your business activities
– In case of a partnership, a copy of the Partnership deed
– Incase of a private limited company, a copy of the memorandum of association and articles of association
– A copy of the rental agreement of the business

Step – 4 Verification
At this step, the local VAT authorities will inspect your business premises at a time scheduled by them.

Step – 5 Collect Registration Certificate
The last step after verification and fee payment requires you to collect the Taxpayer Identification Number (TIN) provided immediately. The VAT registration certificate will be issued either the next day or within a week via post.

Why is VAT Registration Important?
VAT is a primary tax that adds to the nation’s revenue and economy. As a result it is a mandatory tax for all business establishments. The registration process is very easy. The fees are fixed and the verification process is simple.

Source : http://www.ajsh.in/blog

Starting Business in India

These days, most people want to start business in India. From foreign nationals to NRIs to Indian residents, many people are looking at investing their money in India. There are two reasons behind this trend.

One is because the Indian economy is growing at a fast pace and in the near future it has potential to grow more. The other reason is because India is a diversified country and hence it is the most favoured location for doing business. Being a diversified country, India offers different routes of investment to its people.

The most suitable for of entity for carrying out business in India would be to form a private limited company. The formation of a private limited company takes approximately 12-15 working days after receipt of the necessary documents.

In this article, we will discuss the procedure of forming a private limited company in India.

The minimum requirement to start a private limited company:

• Identify the directors of the company (minimum of 2 directors should be present and maximum of 8 is allowed).

• Minimum 2 shareholders

• Minimum capital of the company should be INR 1,00,000/-

• DIN (Directors Identification Number) for both directors. If you do not have one, you can apply for it online

• Digital signature of all directors

• Reservation of the name of the company (You can submit 5-6 names in the order of which you prefer. Based on

 availability, you get your company name)

• Apply for incorporation of company

• Consent from subscriber to director

• Preparation of documents such as Memorandum of Association.

• Filling documents with authorities

• Liaison with the authorities and correction

• Proof of registered address

• NOC from the owner of the premises

• Getting final certificate of incorporation

The procedure:

• The most important step in forming a private limited company is applying for DIN. Only directors that do not have

 this need to apply. They need to submit the form to the central government with a fee of rupees1500 per director.

• Obtaining digital signatures is the next step. The director has to apply for the digital signature certificate. This is 

necessary to file company registration documents.

• Submit 5-6 preferred names for your company in order of the most preferred. Check for name availability.

• Apply for name availability to the concerned ROC.

• Once the name has been approved, you need to apply for incorporation of the company. For this, you will have to

 prepare a Memorandum of Association that details company operation and list of directors.

• Once it is approved, make at least 10 copies of Certificate of Incorporation and Memorandum of Association and 

have it in a booklet form.

• You will then have to fill various forms in the ROC.

• You will have to submit proof of registered address (pan card, voters id)

• Filling fees for final documents

• Other government expenses

• If the registrar is satisfied with all the requirements that have been compiled by the company, they will issue 

certificate of incorporation. The date mentioned on the certificate is the date of incorporation of the company.

• Lastly, you can open a current bank account in any leading bank to carry out your operations.

Therefore, formation of a private limited company is not that difficult as it seems. If you lack the expertise to do it on your own, you can always take the advice and assistance of professionals. Roughly, formation cost of a company should be INR 25,000.

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